Australian Testifies on Wheat Company's Payments to Hussein

SYDNEY, Australia, Feb. 3 - A former wheat export executive on Friday delivered devastating testimony indicating that executives of AWB Ltd., an Australian company, had paid millions of dollars in kickbacks to Saddam Hussein's government in exchange for lucrative contracts.

Speaking before a commission investigating the payments, which violated United Nations sanctions, the former executive, Mark Emons, testified that when the Iraqis demanded under-the-table payments disguised as transportation costs, AWB executives, including the company chairman, Trevor Flugge, acquiesced. He will testify next week.

"In fact," Mr. Emons wrote of Mr. Flugge in an e-mail message introduced at the hearing on Friday, "he is determined that we should be accommodating to the Iraqis so that our business does not come under threat" from American or Canadian competitors. Mr. Emons said he negotiated the first round of the kickback arrangement for AWB.

In a further reflection of the intense competition in the wheat trade, Mr. Emons said Friday that when the company was competing with the United States in Pakistan, AWB paid millions of dollars to agents there, one of whom also worked for the Americans, to tip off the Australians to the American bids. The commission ended its third week of hearings here on Friday.

The head of the commission, Terence Cole, said that among the evidence to be considered would be allegations by U.S. Wheat Associates, an industry organization in Washington, that AWB made improper payments to Iraq. AWB, the former Australian Wheat Board, is now a private company.

The idea that money was paid to Iraq by Australia came to light in October 2005 in a report by an independent panel commissioned by the United Nations to look into corruption in the oil-for-food program.

Company officials who appeared earlier in the hearings have evaded questions from the commission's counsel, John Aguis, about whether the $220 million in payments to a Jordanian trucking company, Alia, were in fact going to Iraq. One executive said, "I don't know," or "I don't recall," some 200 times in response to questions.

Mr. Emons said that just about everyone in the company at senior levels knew the so-called transportation cost was in reality a "fee" for doing business in Iraq. "There was no doubt in the organization that this was a fee," he said. "There was no doubt," he went on, "that this was a fee being paid to the -- by the AWB to Iraq."

When Mr. Emons was reminded by Mr. Aguis that he could not be criminally prosecuted later for what he truthfully told the commission, he laid out a plan and payments AWB resorted to in Pakistan, where the company was in a commercial fight with its American archrival.

Australia and the United States were bidding on a million-ton contract, and AWB hired two agents, identified on Friday only as AA6 and AA7, Mr. Emons said. AA7 was also working for an American wheat company, so by hiring him, AWB knew the prices "that were being put into tender by our U.S. competitors," Mr. Emons testified.

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The Americans had persuaded the Pakistanis to open the tender offers at the Pakistani Embassy in Washington, Mr. Emons said. AWB's agents persuaded the Pakistani government to change its plans and open the tender in Islamabad.

AA6 was paid $4 a ton for the work he did on the million-ton contract, Mr. Emons said.

And what was the work? Mr. Aguis asked.

Making sure that AWB got paid, Mr. Emons said, which was no small feat, considering that Pakistan was practically bankrupt at the time, and there were lots of creditors in line.

Mr. Aguis suggested that $4 million was a lot for just seeing that Pakistan paid a legal obligation.

"It may sound extraordinary, and I'm sure it does to the public," Mr. Emons said, but it was actually not much considering the circumstances. "We were able to unload very low-quality, poor-quality wheat at a reasonable price, and therefore, it was a valuable market."

American wheat growers long dominated the Iraqi market, supplying 80 percent in some years, but Iraq cut off American suppliers after the Persian Gulf war in 1991, allowing the Australians to fill the needs, and the Australians were determined to keep the market.

In a further reminder of the American connection, Mr. Cole, the commissioner, opened Friday with a statement directed at some United States senators representing wheat-growing states who suggested this week that Mr. Cole was not independent, but was beholden to the Australian government.

"For their benefit, I should clarify my position," he said. "I am independent of the Commonwealth government."

He had been a judge on the state Supreme Court, he noted. "Judges in Australia are not elected," he said, "but are appointed for their skill, integrity and independence."